Amber Rudd, work and pensions secretary, is expected to propose this week a pilot transfer of just 10,000 claimants to the universal credit system.
Photograph: Adrian Dennis/AFP/Getty

The roll-out of the government’s flagship welfare programme is to be overhauled amid dire warnings about its impact on the vulnerable, the Observer understands.

Amber Rudd, work and pensions secretary, is to scrap plans for an imminent parliamentary vote allowing 3 million existing welfare claimants to be transferred to the controversial universal credit system. The move is expected to be part of a major rethink designed to quell concerns about the programme’s roll-out and avoid a damaging Tory rebellion.

Rudd will now seek approval from MPs only for a pilot scheme that transfers just 10,000 people from the old to the new system – a system that has been blamed for pushing some to the brink of destitution. Only after the pilot has been assessed will MPs be asked to approve the full roll-out.

A Whitehall source said that Rudd wanted “universal credit to receive a fresh parliamentary mandate and be personally sure the system is working in the interests of every claimant”.

Frank Field, chairman of the work and pensions select committee, which has raised a series of concerns about universal credit, said: “The government seems finally to have woken up to the human catastrophe that was waiting to happen under its ill-formed plans for moving people on to universal credit.”

The proposed pilot scheme, which is expected to be announced in a speech this week, follows a new tone from Rudd since she took her post in November. She has signalled that she wants to make changes to universal credit and battle the Treasury for more resources, to ensure that it works properly and claimants do not have to wait weeks for their money. She has also indicated concerns about the impact of the system on women.

However, the concession is unlikely to appease Labour, and some Tories said that Rudd had simply acknowledged she would never win a vote approving the “managed migration” of all existing welfare claimants. Jeremy Corbyn’s party is calling for the entire universal credit programme, which rolls six working-age benefits into one monthly payment, to be paused and reviewed.

The limited pilot paves the way for the process to be further slowed should problems emerge. She has already told MPs that she will not rush to meet arbitrary timetables. The process, which is already six and a half years behind its original schedule, is due to be completed by the end of 2023.

All current universal credit claimants are people making new claims or those who have had a change in circumstances. The Whitehall source said: “Amber has taken a no-holds-barred approach to reform …. So she will move 10,000 claimants, and carefully monitor this, before returning to parliament to report on her findings and seek that fresh mandate for the full roll-out.”

The source added: “We hope that all sides of the house will back her endeavours. The old system was not some golden age of welfare.”

Field said: “The secretary of state deserves credit for revisiting these plans. As a next step, and in keeping with this new approach, it is essential for the government to proceed with ‘managed migration’ of people to universal credit only once it has proved to parliament that it will not push more vulnerable people to the brink of destitution.”

The government must prove that universal credit will not push more vulnerable people to the brink of destitution

Frank Field, MP

Torsten Bell, director of the Resolution Foundation think tank, said: “The final phase of the roll-out of universal credit is a huge challenge …. It is sensible for Amber Rudd to pilot an approach and then make further improvements before pressing ahead. In the current political climate, delaying the final vote also removes a big headache for a government with quite enough difficult votes to try and win.”

Paul Farmer, head of the mental health charity Mind, said the move represented an important shift: “There are hundreds of thousands of people with mental health problems yet to move across to universal credit and we have been clear that pushing ahead with these plans would be catastrophic for people who are too unwell to navigate the complex and often bewildering process of making a new claim,” he said.

“We don’t yet know what this pilot will look like, but we hope this signals that the government is finally listening and is willing to take disabled people’s fears seriously – giving people who receive support from the benefits system the financial security they need to live full and independent lives. The only way to ensure people are moved over to universal credit safely is by ensuring they won’t be left without income because they weren’t able to make a new claim for a benefit which they’ve already been found to be entitled to.”